Casey’s General Stores Earnings: Profits Buoyed by Strong Fuel Margin, Lucrative In-Store Assortment

We plan to raise our $285 fair value estimate on narrow-moat Casey's General Stores by a low- to mid-single-digit percentage following the firm's strong fiscal 2025 second-quarter results. Earnings per share of $4.85 surpassed our $4.40 estimate due to continued improvement in the firm's in-store gross margin and diligent operating expense control. Although fuel margin per gallon of $0.40 came in slightly below our $0.41 estimate, we don't plan to lower our fiscal 2025 forecast for a fuel margin of about $0.40 significantly. Indeed, longer term, we still think Casey's should enjoy structurally higher fuel profits —we model per-gallon margins in the low $0.40 range as opposed to roughly $0.20 prepandemic—as inflationary cost pressures and flattening fuel demand have driven a steep uptick in industrywide breakeven margins for sub-scale independent operators. Moreover, we expect gradual industry consolidation to continue given that nearly two thirds of the nation's 150,000 convenience stores are still owned by operators with 10 or fewer stores.